International Petroleum Corporation

Welcome to IPC's 2026 second quarter results update presentation. I'm William Lundin, the President and CEO, and joined today by Christophe Nerguararian, our CFO, as well as Rebecca Gordon, our SVP of Corporate Planning and Investor Relations. I'll begin with the highlights and provide an operational update, then hand it to Christophe to walk through the financial section. After the presentation, we can take questions, which the audience can submit through conference call or via the internet online. Getting right into the second quarter highlights for IPC. Our average production for the second quarter was right in line with guidance at 42.2 thousand barrels of oil equivalent per day. And our full year 2026 production guidance is maintained at 44 to 47 thousand BOEs per day. Second quarter operating costs came in line with expectation at USD $19.10 per BOE. And the OPEX per BOE forecast for the full year is maintained as per the original CMD guidance at USD 18 to 20 per BOE. And of course, the major announcement in the quarter for the company was achieving first oil at Blackrod. It's the largest organic growth project IPC has undertaken since formation in 2017. And to execute ahead of schedule and on budget is a huge achievement that we're very, very pleased about. Similar to production and OPEX per BOE guidance, we're maintaining our CAPEX guidance at $163 million USD for 2026, noting the majority of the capital has been spent in the first half of $120 million USD or around three quarters of that capital budget. Q2 capital spend was $49 million. Operating cash flow for Q2 was robust at 67 million USD. Noting oil prices were higher in the second quarter relative to the first quarter, averaging around $100 barrel Brent. But 40% of our production exposure, oil production exposure was hedged at a WTI price between low and mid 60s and for the Brent side between the mid to high 60s for Brent. So despite those hedges in place, still a robust print in cash flow. Our full year OCF is forecast at 230 to 330 million USD assuming 70 to 90 for the remainder of 2026. And free cash flow for Q2 was a positive $4 million, noting this is the first quarter of positive free cash flow since 2023, as we transition from a higher spending period during the Black Rod build out to start up. Full year free cash flow is expected to be between 10 to 110 million USD between 70 to 90 dollars barrel Brent for the rest of the year. Net debt as at the end of Q2 stands at 509 million, about a four million dollar reduction relative to the prior quarter thanks to the positive free cash flow delivery in Q2. We have greater than 150 million dollars of undrawn credit availability under a Canadian bank syndicate. and as of July 1st, 2026, our production, oil production is fully exposed to WTI and Brent oil prices with the prior benchmark oil hedges rolling off as I had mentioned previously. There are some Canadian heavy oil differential transport and quality related hedges for the remainder of 26 and some into 27 that are in place as well as some natural gas hedges that are also in place for 2026, all of which are in the money currently. and our seventh annual sustainability report was issued alongside our Q2 results. So as can be seen on the production plot, we've seen continuous flat production performance through the first six months of the year with average rates of around 42.6 thousand barrels of oil equivalent per day. Stable performance across the portfolio year to date and really looking forward to the imminent production growth going into the second half and beyond. As mentioned, we're well positioned to deliver on our annual production guidance for 2026, so 44 to 47,000 barrels of oil equivalent per day. The guidance bands in the production forecast shows a progressive production ramp up in the second half of the year and that trend will continue into 2027. The increased forecast is predominantly due to the Black Rod startup and partially supported by intra-year production investment additions at existing producing assets which will yield more of an impact at the end of this year and going into 2027. I'll touch on more specific activity detail in the following slides. Q2 is the inflection point from a production standpoint and higher production quarterly averages will shine through going forward. As we transition from inventorying period at Blackrod to consistent sales mode in Q4, we'll also see a material uplift in cash flow generation. Our current production mix is split 70% towards oil and 30% towards natural gas, which is important to highlight. And as per my previous comment, with larger proportion of oil weighted production coming imminently, our future production mix is going to be higher proportionally weighted towards oil versus natural gas lending to increased cash flow. Operating guidance is maintained at USD 18 to $20 per BOE with Q2 costs settling in at $19.10. As previously reported, we added some production enhancement activity that is going to be expense, most of which will fall into Q3, which is expected to be a slightly higher OpEx per BOE quarter before dropping in the subsequent quarters. Christophe will expand on this evolution in his section of the presentation. So operating cash flow for the first half settled in at 134 million USD with an average Brent price of $92 and a WTI price of 82 and WCS of 68. It has been a volatile period on the pricing front so far year to date. The cash flow and corresponding prices were higher than our original CMD guidance as shown on the right hand side of the slide. So we're pleased to see higher cash flow generation coming through. Looking forward for the full year OCF, we expect to generate between $230 and $330 million between 70 and 90 Brent, assuming a differential of $5 from Brent to WTI and $14 from WTI to WCS. The proportion of operating cash flow is heavily tilted towards Q4 compared to Q3 for the second half as can be shown with the lighter shading on the bar chart in the middle of the slide. This is largely due to the prior mentioned additional activity taking place in Q3 and inventorying treatment at Blackrod. The torque to higher prices is significant and we are fully exposed to Brenton WTI prices going forward since the Brenton WTI hedges concluded at the end of June. Our CapEx program, inclusive of decommissioning spend, is maintained at $163 million, noting we did increase the capital budget at Q1 relative to capital market stay, large in part due to the sanctioning of short cycle investments in France and the Suffield area assets in light of the higher commodity pricing environment that we saw as the year progressed relative to starting 2026. We do retain flexibility to adjust our program for the second half given our operatorship status at all the assets in our portfolio. Free cash flow is projected to be $10 to $110 million between $70 and $90 Brent for the remainder of 2026 and returning to a free cash flow positive position is really fantastic to see and the waterfall of free cash flow will significantly grow in the years ahead. So since inception, IPC has repurchased 77 million shares at an average price of 79 sec per share or CAD $11 per share, translating into around $1 billion of value creation compared to our current share price. We have the ability to repurchase up to 6.5 million shares through our normal course issuer bid program, which represents 10% of the free float. And our current share count today is less than 113 million shares, notably lower than the original share count in 2017. So driving up production value reserves and resource longevity per share is really a key ingredient to maximizing shareholder value. As previously reported to the market, Black Rod Phase One is officially producing oil, achieving this milestone at the end of May ahead of the original schedule guidance. Costs came in line with the budget at $8.55 million USD growth capital. We currently have five well pairs online with several other well pairs to be converted upon necessary conformance conditions being met. We held a Black Rod site visit at the beginning of July with our board and the pride and sheer competency of the top tier talent at site is really off the charts and the state of the art facility is off to a fantastic start as we get into operational startup and ramp up mode. So this is really a unique feat in the industry to deliver a multi-year growth project on budget and ahead of schedule with no material safety incidents. Really hats off to the entire team involved for executing this transformational greenfield project responsibly. Black Rod is a long-life asset that is officially unlocked as the Phase 1 CPF is now on stream. Plateau production for Phase 1 is 30,000 barrels of oil per day. We have 311 million 2P reserves assigned to the Phase 1 project. which represents around 1.4 billion USD in net present value using a 10% discount rate based on the conservative year-end 25 reserve auditor price deck, along with a 1-1-2026 breakeven of $47 WTI. We have regulatory approval at this asset to go to 80,000 barrels of oil per day and the combined 2C plus 2P volumes represent 1.45 billion barrels of recoverable resource, which is shown on the graph on the bottom. There's been a substantial increase to the total recoverable barrels compared to that of the early volumes in 2010. So the depositional environment of this asset really lends to a scalable and repeatable upside and we continue to work behind the scenes to mature future phase expansions which are yet to be recognized in their underlying net asset value or future cash flow projections. Moving on to Onion Lake Thermal. OLT has delivered a stable production through the first six months of the year. This is our Saskatchewan thermal operation. We did shoot some 4D seismic earlier this year. That data is under review and preparations are ongoing for the next sustaining capital activity. at the Suffield Area Assets. This consists of our Suffield block acquisition that we acquired from Synovus in early 2018, as well as the Brooks package that we purchased from Core Four in 2023. And this package overall continues to deliver stable, low decline, reliable production. And we're super excited to be drilling again here within the basal quartz formation for production. Multi-leg lateral wells are planned to be drilled. And first half production from our Brent-linked assets was around 5,000 barrels of oil per day. Drilling is underway in France with four-well sidetrack campaign. Initial results from the first well are very encouraging thus far, and we look forward to future reporting on the progress of this campaign. Malaysia-dated Brent premium realizations have been very material, as Christophe will share in his section of the presentation. and work over activity is ongoing in bird time which will boost production rates from current levels looking ahead into Q4. Now I'll hand it over to Christophe to expand on the financial highlights.

Thank you very much, Will. Good morning to everyone. So it was a solid quarter operationally. So hands off to all of the teams locally with the production right in line with guidance in excess of 42,000 barrels of oil equivalent per day. We saw some very strong oil prices during the quarter with an average dated Brent price in excess of $100 per barrel. And so with operating costs in line with guidance at $19 per barrels or equivalent, IPC generated strong operating cash flow and a bid at 67 and 64 million US dollars respectively. I think what's really worth noting here is that almost for the first time in almost three years, The operating cash flow fully covers the capex. And that is true. That was true in the second quarter. And that is true year to date. And so that's really the turning point we've been talking about for a while with Black Rod, first oil achieved at the end of May during the quarter. We've not really turned the corner yet, but almost. At least we see a strong reduction in the BlackRod CapEx and still a very strong operating cash flow. So we're really going to move back into positive free cash flow territory. That was the case in this second quarter with a ramp up at BlackRod in the third quarter. It may or may not be again the case, but we would hope to have another free cash flow positive or right in line with the second quarter. The real change will occur in the fourth quarter with a much stronger production from Blackrod. Translating into what we believe will be a much stronger free cash flow towards the end of the year so the net debt for at the end of the quarter was was reasonably flat just around 510 million us dollar looking at the the realized prices of course with the the war in Iran, the oil which was not flowing freely through the Strait of Hormuz. We saw very high oil prices in April and May, specifically during the second quarter. So with dated Brent price of 104 US dollar per barrel on average during the quarter and WTI, WCS at 92 and 78. Those are very high level which we didn't fully benefit from because around 40% of our production was hedged before the war started in early March in Iran. That being said, maybe just another comment that's interesting is that Will talked about it but we were lifting cargos roughly every two months in Malaysia and the premium we get there is always an interesting indication about how tight physical markets are and clearly The June cargo, which was priced in April during the quarter, saw a very strong, very high premium, which showed how tight markets was. And again, for our next cargo in the third quarter, we've already agreed on a very high premium as well. So that's a sign that the physical market remains very tight. Looking at the gas prices, not much change, frankly. And sadly, the Canadian gas prices remain at a discount to the US market. It's not fully or very well physically connected with the US market, which enjoys higher gas prices. So during the quarter, we realized The price of 1.75 Canadian dollars per MCF. So it's traditional that there's an element of weakness for gas prices during the summer. But unfortunately, it stays well below US gas prices. looking at the operating cash flows and EBITDAs for the first six months in 2026 and compare those to 2025. Reasonably stable here. The production was a bit higher last year. Oil prices a bit lower last year as well. So it's roughly in line. with around $130 million of operating cash flow during the first six months, both last year and this year, and around $125 million both last year and this year. So I think as we touched upon before, with a bit more one-off OPEX, with more activity in terms of workovers in Malaysia, in Canada as well, We're expecting maybe the operating cash flow to be in line or lower in Q3, but much higher with the Black Rod contribution during the fourth quarter. And indeed, you can see on the OPEX per barrel, so we are maintaining our guidance, but you see that clearly with some of the activity which we sanctioned at the end of Q1 and which is really being carried out in this third quarter, you can see a bump in the operating cost per barrel in that third quarter that is well anticipated and hopefully well communicated to you and the market but on average we were expecting to be in the second part of that $18 to $20 range, but stay within it. Again, I think it's important to anticipate and note that in the fourth quarter, as BlackRock production is going to further ramp up, you can see the natural decline in OPEX per barrel. Irrespectively of what you can see here in the third and fourth quarter, I think it's important for us to reiterate that the mid to long term operating cost per barrel remain very positive and should be below what we see here once Black Rod is ramping up to its full potential at 30,000 barrels a day in the course of next year towards the end of next year. Strong netback, obviously driven by the strong operational and the solid oil prices. You can see here, both in the second quarter and for the first six months, relatively stable with an operating cash flow netback in excess of $17 per barrel of oil equivalent and an EBITDA at around $16.5 per barrel of oil equivalent. Looking at the net that's really at the cash flow and I like and I want to emphasize again that for the first time in a while you can see here the operating cash flow of 134 million US dollars for the first six months which is covering more than all of our development capex and an abandonment cost. So we are moving into this phase where finally we are going to generate free cash flow. So it's not fully the case yet for the first six months, but we're getting there. You can see that the operating cash flow fully covers our capex and cash GNA. And we believe that very soon we'll be covering as well all of our cash financial items and working capital to put us in a solid free cash flow position. Please note that we had a $6 million US dollar sale of assets in the first six months. Those were lands which we never really intended to drill. It's some acreage which we had been collected along the prior years and were able to sell them to some Canadian companies. In terms of financial items, the situation on the balance sheet and the capital structure is very stable with our bonds and revolving credit facilities. So you can see that we have net interest expenses of around 10 million USD per quarter. Stable again, quarter to quarter, and we're expecting stable again in going into the third quarter. And GNA is stable as well at around 4, 4.3, 4.2, 4.3 million US dollar per quarter, or just above $1. So strong financial results with almost $360 million of revenues, a cash margin of $135 million, gross profit of $75 million and a net result of $23 million for the first six months. The balance sheet Not much to mention here. The investment of course goes into increasing the value of our oil and gas property assets on the asset side of the balance sheet and we're continuing to depreciate those assets as we are producing them. We have very little cash now and we're usually maintaining around 10 million dollars on the balance sheet. and otherwise withdraw or repay under our revolving trade facility as we need. The capital structure I mentioned is very stable. We have our five-year bonds with a coupon of 7.5 maturing in 2030, so 450 million US dollars of bonds. On top of that, as an adjustment if you wish, Depending on whether we need it or not, quarter to quarter, we have access to an equivalent revolving credit facility from our Canadian banks of 250 million US dollars and only 100 million CAD were drawn at the end of the quarter. We have reduced our outstanding letters of credit now that the Black Road project is finally on stream. So we have roughly 12 million Canadian dollars of letters of credit just to support access to pipelines and some export facilities and we had a very small amount under our French loan which was fully repaid in the month of May. So we didn't fully benefit from the high oil prices on only 60% roughly. We benefited from doing that second quarter because we had 40% of WTI and Brent exposure hedged. That is no longer the case going forward. benchmark hedging going forward. What we have though for the next 18 months is we've hedged some differential. So we have typically for this year the WTI WCS differential hedged at minus 12.5 which is roughly $2 in the money. and depending on the months you have the detail on this table. We've also hedged a part of the transportation costs between Hardesty Canada and Houston in the United States and all of these hedges are in the money and you can see around $6 million of positive mark to market on our balance sheet. So that concludes my final section and I will hand over to Will for the overall conclusion.

Thank you, Christophe. In summary, a solid second quarter for the company and a compelling outlook going forward. Q2 production of 42.2 thousand barrels of oil equivalent per day, OPEX of $19.10 per BOE in the quarter. and the original Capital Markets Day production and OpEx guidance is maintained. Capital spend in Q2 was 49 million USD and the full year 2026 outlook is maintained at 163 million dollars. Operational cash flow was 67 million USD for Q2 and 230 to 330 million USD is expected for the full year. We have an excess of $150 million of undrawn liquidity headroom. Our sustainability report was issued alongside our Q2 results, which I encourage the audience to read. It highlights the responsible business practice undertaken in 2025, and this voluntary report is progressively aligned with the latest standards such as IFRS 2. So with that, I'll hand it to the operator to open the floor for questions. And as well, questions can be submitted online.

Thank you, sir. Ladies and gentlemen, if you wish to ask a question over the phone, please signal by pressing star 1. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press star 2. And you may also submit your questions via the webcast. And the first question is from Theodore Nielsen from ASB.

Please go ahead. Good morning, Will and Christophe, and thanks for taking my questions. And congrats on Black Road First Oil. Our first question is on production guidance. As you mentioned, you achieved black roll first oil slightly before expectations, slightly before guidance, but you do not increase production guidance, although first oil was achieved earlier than expected. Why is that? And second question is on on hedging. Christophe, you highlighted you don't have too much hedging, at least on the oil side going forward. Is that mainly explained by lower cap is going forward, so lower commitments, or do you have any particular market view that drives that hedging strategy? My last question is on share purchases, repurchases. I think we discussed this also last quarter, but now most of the Blackwell CapEx is behind us. Should we expect you to do some more on repurchases than you have done over the past couple of quarters? Any thoughts around that would be useful.

Yeah, thanks for the questions, Theodore. So I'll answer the first question, the third question, and I'll hand the hedging question to Christophe to answer that one. So you're right, we're really pleased about Blackrod First Oil being achieved ahead of guidance. And I think the type of asset that we're talking about and First Oil being achieved, there are gonna need to be 40 well pairs online to deliver 30,000 barrels of oil per day. So we did have our initial set of well payers came on ahead of expectation, which is very positive. But at this point in time, I feel like it's still prudent to maintain the full year guidance. And as we progress further into the year, You know, we feel like we're pretty well positioned to deliver at least within the midpoint and potentially in excess of that. So we're maintaining the guidance as things stand at this point in time. But in the field, it's looking very positive at this point at the black rod. and on the share repurchase side regarding the flexibility that's right as I had mentioned in the presentation we have the flexibility repurchase around six and a half million shares we have haven't done that yet as we remain steadfast on executing Blackrod which of course as you point out is now on stream we're pleased to see a marginal net debt reduction in this quarter and and we are monitoring you know macro micro Thanks for a very good question obviously and I think we

We are generally bullish long term. The short term is much more difficult to take a view on and changes almost on a daily basis, depending on the statements coming from the White House in the US. Now, that being said, also, we shouldn't be confused with the very short term daily Volatility and the long-term oil prices where we can hedge. There is a very significant... The curve is relatively steep and backwardated and so we obviously cannot hedge at the current spot rates. But we are monitoring that. Now the flip side is we've always communicated that when The bulk of the capex is behind us or we don't have any specific debt maturities. We will take a lighter approach on benchmark hedging. So we'd rather focus on hedging and securing good transportation costs for crew to the US Gulf Coast or the absolute WTI, WCS differential. and I think we'll be a bit more cautious on hedging dated brands or WTI prices. It's not excluded, but we're going to take a much more prudent approach there.

Okay, thank you. Makes sense. And actually, if I may have even one more question that is on, could you just please remind me of what's the latest you have communicated on timeline for sanctioning of Black Rod Phase 2?

Yeah, phase two and future phase expansions still lie within our contingent resources. There hasn't been any prescriptive disclosure in terms of when the next expansion project takes place. But it is a lot of work that's happening behind the scenes on looking into multiple expansion opportunities there. And as those plans mature, we will provide an update accordingly to the market at that point in time. Okay, thanks.

That's all for me. Thank you.

Thank you. As a final reminder, if you wish to ask a question over the phone, please signal by pressing star one now. We will pause for just a moment to allow you to signal. It appears there are currently no further questions over the phone. With this, I'd like to hand the call back over to our host for any webcast questions.

Okay, thank you, operator. We have a few questions from the internet here. So just kicking off with a question regarding the portfolio will perhaps you can comment with BlackRod now upstream is now the time to rationalize your portfolio and divest your international assets.

The asset base that we have has demonstrated high cash flow generative ability and the foundation of existing assets has really supported us to put us in a place to be able to unlock the likes of BlackRod phase one. There's still a lot of life out of the portfolio beyond BlackRod with the existing producing assets. We do think of ourselves as ruthless capital allocators and we're interested in maximizing value. There's no imminent processes at this point in time to note.

Okay, thanks very much. We had a few questions on hedging Christophe, which I think you've covered here. But maybe you could comment on given we've only got 40 million remaining capex for the year. How does management think about the opportunity to increase this to take advantage of commodity prices versus paying down debt?

Yeah, increasing capex you mean? Yes, increasing activity. We've already leveraged some extent or in our portfolio we have short-term quick payback activity sets. So we've committed some increased activity as you know at the end of Q1. We are constantly looking and trying to high-grade those options and possibilities. We'll mention earlier on to the other question that we're working on future potential phases at BlackRod, so there's always an opportunity to spend two or three million and accelerating those future phases and expansion, which we're working on in any case. which may be considered OPEX or CAPEX. I think we're very active. Generally, we don't anticipate to significantly increase further CAPEX this year, but a lot of activity is happening behind the scene already.

Okay, thanks Christophe. We do have another couple of capital allocation questions, but I think one here, Will, that we haven't covered is, are dividends something that's being considered going forward?

Yeah, we have the full flexibility on our shareholder returns in terms of dividends or buybacks and subject to the conditions of the company, the liquidity. When we look to return value back to shareholders in the firm of distributions and subject to where our share price is sitting, we kind of dictate the form of shareholder returns. So we had never had a dividend in IPC and we are in the midst of a lot of growth. And so we really firmly believe the share price appreciation is still to shine through much higher than current levels. So at this very point in time, I think it's less likely that a dividend would be implemented in the short term.

Okay, thanks Will. And then just a quick question, if you can elaborate on any CapEx plans for 2027.

Our 2027 budget details will be put together and released to the market at a capital markets day in 2027. We have our year-end 25 reserves plan, which is based on the year-end reserve auditor price deck, which has a CapEx profile, which we have disclosed externally as well for the next five years. So subject to commodity prices, the opportunity set of maturation, We may look to add on incremental value adding activities based on that current assumption, but it's something that will be reviewed in detail at the end of this year and consulted with the board before we release our final 2027 budget, which will come at Capital Markets Day.

Thanks, Will. And then the final question here really is to do with strategic focus going forward. Will that include some M&A?

Yeah, we've always said M&A is in our DNA and we remain opportunistic to growing inorganically provided a tangible and robust opportunity presents itself. And we are very much anchored in maximizing shareholder value. We have a tremendous portfolio of organic growth potential within it. And as well, we always want to benchmark against buying background stock as well. compared to doing M&A. So within the boundaries of that, if the right opportunity presents itself for the right price, we're open and opportunistic to growing through M&A, but it's grounded within those boundaries as I had touched on.

Okay. Thanks very much, Will. Christophe, that's the questions that we have today. So we'll close the conference, Will.

Thank you. Thanks very much. Look forward to reporting in Q3.